It’s never easy to transplant management programs from one company to another. In South America, it’s axiomatic that our structure and style cannot be duplicated. Semco is either too small, too big, too far away, too young, too old, or too obnoxious.
We may also be too specialized. We do cellular manufacturing of technologically sophisticated products, and we work at the high end on quality and price … Still the merit of sharing experience is to encourage experiment and to plant the seeds of conceptual change …
Participatory hot air
The first of Semco’s three values is democracy, or employee involvement. Clearly, workers who control their working conditions are going to be happier than workers who don’t. Just as clearly, there is no contest between the company that buys the grudging compliance of its work force and the company that enjoys the enterprising participation of its employees.
But about 90% of the time, participatory management is just hot air. Not that intentions aren’t good. It’s just that implementing employee involvement is so complex, so difficult, and, not uncommonly, so frustrating that it is easier to talk about than to do …
Size reduction is essential for putting employees in touch with one another so they can coordinate their work. The kind of distance we want to eliminate comes from having too many people in one place, but it also comes from having a pyramidal hierarchy.
Pyramids and circles
The organizational pyramid is the cause of much corporate evil because the tip is too far from the base. Pyramids emphasize power, promote insecurity, distort communications, hobble interaction, and make it very difficult for the people who plan and the people who execute to move in the same direction. So Semco designed an organizational circle. Its greatest advantage is to reduce management levels to three – one corporate level and two operating levels at the manufacturing units.
It consists of three concentric circles. One tiny, central circle contains the five people who integrate the company’s movements. These are the counselors I mentioned before. I’m one of them, and except for a couple of legal documents that call me president, counselor is the only title I use. A second, larger circle contains the heads of the eight divisions – we call them partners. Finally, a third, huge circle holds all the other employees. Most of them are the people we call associates; they do the research, design, sales, and manufacturing work and have no one reporting to them on a regular basis. But some of them are the permanent and temporary team and task leaders we call coordinators. We have counselors, partners, coordinators, and associates. That’s four titles and three management layers.
The linchpins of the system are the coordinators, a group that includes everyone formerly called foreman, supervisor, manager, head, or chief. The only people who report to coordinators are associates. No coordinator reports to another coordinator – that feature of the system is what ensures the reduction in management layers …
Associates often make higher salaries than coordinators and partners, and they can increase their status and compensation without entering the ‘management’ line.
Managers and the status and money they enjoy – in a word, hierarchy – are the single biggest obstacle to participatory management. We had to get the managers out of the way of democratic decision making, and our circular system does that pretty well.
But we go further. We don’t hire or promote people until they’ve been interviewed and accepted by all their future subordinates. Twice a year, subordinates evaluate managers. Also twice a year, everyone in the company anonymously fills out a questionnaire about company credibility and top management competence. Among other things, we ask our employees what it would take to make them quit or go on strike.
We insist on making important decisions collegially, and certain decisions are made by a company-wide vote. Several years ago, for example, we needed a bigger plant for our marine division, which makes pumps, compressors, and ship propellers. Real estate agents looked for months and found nothing. So we asked the employees themselves to help, and over the first weekend they found three factories for sale, all of them nearby. We closed up shop for a day, piled everyone into buses, and drove out to inspect the three buildings. Then the workers voted – and they chose a plant the counselors didn’t really want. It was an interesting situation – one that tested our commitment to participatory management …
Employees also outvoted me on the acquisition of a company that I’m still sure we should have bought. But they felt we weren’t ready to digest it, and I lost the vote. In a case like that, the credibility of our management system is at stake. Employee involvement must be real, even when it makes management uneasy. Anyway, what is the future of an acquisition if the people who have to operate it don’t believe it’s workable?
Hiring adults
We have other ways of combating hierarchy too. Most of our programs are based on the notion of giving employees control over their own lives. In a word, we hire adults, and then we treat them like adults.
Think about that. Outside the factory, workers are men and women who elect governments, serve in the army, lead community projects, raise and educate families, and make decisions every day about the future. Friends solicit their advice. Salespeople court them. Children and grandchildren look up to them for their wisdom and experience. But the moment they walk into the factory, the company transforms them into adolescents. They have to wear badges and name tags, arrive at a certain time, stand in line to punch the clock …
One of my first moves when I took control of Semco was to abolish norms, manuals, rules, and regulations. Everyone knows you can’t run a large organization without regulations, but everyone also knows that most regulations are poppycock. They rarely solve problems …
It’s also true that common sense requires just a touch of civil disobedience every time someone calls attention to something that’s not working … so we replaced all the nitpicking regulations with the rule of common sense and put our employees in the demanding position of using their own judgment.
We have no dress code, for example. The idea that personal appearance is important in a job – any job – is baloney … A company that needs business suits to prove its seriousness probably lacks more meaningful proof … women and men look best when they feel good …
We encourage – we practically insist on – job rotation every two to five years to prevent boredom. We try hard to provide job security, and for people over 50 or who’ve been with the company for more than three years, dismissal procedures are extra complicated.
On the more experimental side, we have a program for entry-level management trainees called Lost in Space, whereby we hire a couple of people every year who have no job description at all. A ‘godfather’ looks after them, and for one year they can do anything they like, as long as they try at least 12 different areas or units.
By the same logic that governs our other employee programs, we also have eliminated time clocks. People come and go according to their own schedules … one man wanted to start at 7 A.M., but because the forklift operator didn’t come until 8, he couldn’t get his parts. So a general discussion arose, and the upshot was that now everyone knows how to operate a forklift …
Hunting the woolly mammoth
… As Antony Jay points out, corporate man is a very recent animal. At Semco, we try to respect the hunter that dominated the first 99.9% of the history of our species. If you had to kill a mammoth or do without supper, there was no time to draw up an organization chart, assign tasks, or delegate authority …
Put ten people together, don’t appoint a leader, and you can be sure that one will emerge. So will a sighter, a runner, and whatever else the group needs. We form the groups, but they find their own leaders. That’s not a lack of structure, that’s just a lack of structure imposed from above.
But getting back to that mammoth, why was it that all the members of the group were so eager to do their share of the work – sighting, running, spearing, chiefing – and to
stand aside when someone else could do it better? Because they all got to eat the thing once it was killed and cooked. What mattered was results, not status.
Corporate profit is today’s mammoth meat. And though there is a widespread view that profit sharing is some kind of socialist infection, it seems to me that few motivational tools are more capitalist. Everyone agrees that profits should belong to those who risk their capital, that entrepreneurial behavior deserves reward, that the creation of wealth should enrich the creator. Well, depending on how you define capital and risk, all these truisms can apply as much to workers as to shareholders …
Semco’s experience has convinced me that profit sharing has an excellent chance of working when it crowns a broad program of employee participation, when the profit-sharing criteria are so clear and simple that the least-gifted employee can understand them, and perhaps most important, when employees have monthly access to the company’s vital statistics – costs, overhead, sales, payroll, taxes, profits.
Transparency
… Nothing matters more than those vital statistics – short, frank, frequent reports on how the company is doing. Complete transparency. No hocus-pocus, no hanky-panky, no simplifications.
On the contrary, all Semco employees attend classes to learn how to read and understand the numbers, and it’s one of their unions that teaches the course. Every month, each employee gets a balance sheet, a profit-and-loss analysis, and a cash-flow statement for his or her division …
What matters in budgets as well as in reports is that the numbers be few and important and that people treat them with something approaching passion. The three monthly reports, with their 70 line items, tell us how to run the company, tell our managers how well they know their units, and tell our employees if there’s going to be a profit. Everyone works on the basis of the same information, and everyone looks forward to its appearance with what I’d call fervent curiosity.
And that’s all there is to it. Participation gives people control of their work, profit sharing gives them a reason to do it better, information tells them what’s working and what isn’t.
Letting them do whatever the hell they want
So we don’t have systems or staff functions or analysts or anything like that. What we have are people who either sell or make, and there’s nothing in between. Is there a marketing department? Not on your life. Marketing is everybody’s problem. Everybody knows the price of the products. Everybody knows the cost. Everybody has the monthly statement that says exactly what each of them makes, how much bronze is costing us, how much overtime we paid, all of it. And the employees know that 23% of the after-tax profit is theirs.
We are very, very rigorous about the numbers. We want them in on the fourth day of the month so we can get them back out on the fifth. And because we’re so strict with the financial controls, we can be extremely lax about everything else. Employees can paint the walls any color they like. They can come to work whenever they decide. They can wear whatever clothing makes them comfortable. They can do whatever the hell they want. It’s up to them to see the connection between productivity and profit and to act on it.
Source: Excerpts from Ricardo Semler, ‘Managing without managers’, Harvard Business Review, September–October, 1989. Reprinted by permission of Harvard Business Review. Copyright © 1989 by the Harvard Business School Publishing Corporation; all rights reserved.
After all is said and done, more is said than done.
Aesop quotes, 620–560 bc
INDEX
20/80 Law (Pareto’s Law)
A to Z of laws and rules, 2nd
Accenture, 2nd
accounting information, 2nd
Acheson’s Rule of the Bureaucracy
action, 2nd, 3rd
‘doing first’ model of decision making, 2nd
orientation to, 2nd
random
adventure, 2nd, 3rd
advice
aesthetics
aggregation
aid to developing countries
Albuquerque
Amazon
American management, compared with Japanese management, 2nd
Ampex
analysis, 2nd, 3rd
anticipation
Apple
art, 2nd
authority
Barrett, Colleen
bees, 2nd
beliefs
Berra’s Law
biases, human, 2nd
Bingham, Alpheus
boards of directors
Bombardier
Bonafede’s Revelation
bonuses, 2nd
Boren’s Laws of the Bureaucracy
Boston Consulting Group
brevity
bribery
Broughton, Philip
budgets
Buffett, Warren
bug cleaner, 2nd
Bush, George W., 2nd
business schools see MBA programmes
buzzword generator
caring approach to management, 2nd
caribou bones
Carlson, Sune
case study method, 2nd
Cattaui, Maria
change
change management as oxymoron, 2nd
changing world and leadership development, 2nd
crafting strategy, 2nd
engineering and stability, 2nd
Honda in the United States, 2nd
Japanese management compared with American management, 2nd
senior managers’ contribution, 2nd
chaos
charts, PowerPoint
chief executive officers (CEOs)
compensation, 2nd, 3rd, 4th
gambling, 2nd
inability of a star executive to transform a business, 2nd
performance of Harvard-educated CEOs, 2nd
who believe themselves to be strategists
circular organization, 2nd
Cisco Systems
city governments
classics, management
climate, fertile
climbing
cognitive style, PowerPoint, 2nd
commitment
common sense
communication
contradictory components, 2nd
formal and informal, 2nd
impact of the internet
communityship, 2nd
Compaq, 2nd
consulting work, 2nd, 3rd, 4th
contradictory impulses
control, 2nd
employee participation at Semco
illusion of
images of
conventional wisdom
cost reductions, 2nd
Cox, Christopher
craft, 2nd
crafting strategy, 2nd
craft managers
creative discovery
creative strategists
creativity, 2nd
letting everyone have ideas, 2nd
Cropp’s Law
cult of leadership, 2nd, 3rd
culture, 2nd
current concerns
data presentation
Dave’s Law of Advice
decentralization, 2nd
deception
decision making, 2nd, 3rd, 4th
collegial
degrees of freedom
delayering
Deming, W. Edwards
democracy (employee involvement), 2nd
deputy quartermaster-general, 2nd
developing countries
development, leadership
Devons, Eli, 2nd
discontinuity
Displaced Hassle, Principle of
distortion
distributed leadership, 2nd, 3rd, 4th
diversification
Dobbins’ Law
‘doing first’ model of decision making, 2nd
Donaldson, Tom
Dow’s Law
dress codes
Drucker, Peter, 2nd, 3rd, 4th
earned
leadership
employee involvement, 2nd, 3rd
empowerment, 2nd
engineering, 2nd
Enron
entrepreneurship
and management
environmental problems
Epstein’s Law
Ewing, David
executive compensation, 2nd, 3rd, 4th
fads, management, 2nd, 3rd, 4th
false encouragement
family
fast food
financial incentives
financial services, 2nd
Fiorina, Carly, 2nd
first-mover advantage
First Myth of Management
flaws, 2nd
Fleming, Alexander
flexibility
Ford, Henry
Ford Motor Company, 2nd
forecasting, 2nd
formal information
limitations of
Foster, Mark
fragmentation
frozen food processing
Fujisawa, Takeo
Galbraith, John Kenneth
gambling, 2nd
General Electric
General Motors, 2nd, 3rd
generous strategists
Gerstner, Lou
global interconnections
golden parachutes
Goodwin, Fred
Google
Grossman’s Misquote
groups, leadership defined by
groupthink
gurus, management
Halpin, James
hard information see formal information
Harvard Business Review (H.B.R.)
Harvard Business School
100th birthday celebrations
case study method, 2nd
damage caused by alumni in financial services, 2nd
performance of CEOs educated at, 2nd
Hasbro
Heller’s Myths of Management
helplessness
Hendrickson’s Law
heroic leadership, 2nd, 3rd
Hewlett, Bill
Hewlett-Packard (HP), 2nd
Hofstadter’s Law
Honda, Soichiro, 2nd
Honda, 2nd
Hornby, Andy
human biases, 2nd
Management- It's Not What You Think! Page 16